As the realization of stubbornly high inflation, paying more for less, a possible recession, an endless war in Eastern Europe, supply chain disruptions resulting in empty shelves and job cuts sink in, the United States may be entering the fear stage.
Working-class families worry about feeding their children. Young adults lament that they can’t afford the promised American dream of home ownership and starting a family. Only a year ago, the U.S. was reaping the benefits of economic prosperity. Now, 401(k)s, college funds for the kids and stock market investments have substantially plunged with no end in sight.
Emblematic of the mindset shift is what happened in the tech sector. After unbridled growth for over a decade, hiring thousands of well-paid professionals and offering them enticing amenities and perks, the party has abruptly ended. The end of cheap money is over due to the Federal Reserve Bank’s quantitative tightening and the government halting trillion-dollar financial stimulus programs.
You can see the results on LinkedIn, as thousands of newly laid-off tech workers post about their downsizing in pursuit of new jobs. Renowned venture capitalist Bill Gurley summarized the new landscape in an informative Twitter thread, stating that the “‘game on the field’ has changed.” During the economic boom, the tech companies “created a Disney-esque set of experiences [and] expectations.” Gurley added, “You can’t ‘wish away’ the fact that if your company isn’t cash-flow positive [and] capital is now expensive, you are living on borrowed time.”
Is Mark Zuckerberg Starting To Panic?
It’s been reported that fearful Meta, the parent company of Facebook, employees are expecting job cuts as high as 10%. Mark Zuckerberg, the imperial head of the once-invincible, social-media giant, said he would crack down on low performers.
Meta human resources chief Lori Goler struck a chord of fear, as she suggested in a memo that employees who couldn’t meet expectations in this new tougher environment may have to worry about the safety of their positions within the organization. Meta has been feeling the heat, as TikTok continues to steal market share.
The New York Post reported that Zuckerberg allegedly couldn’t maintain his composure when one of his employees inquired about vacation and personal days off during a meeting in which the CEO shared his plans for potentially letting go of underperforming workers.
The Wall Street Experts Sound The Alarm
You may recall the name Michael Burry from the book and film, The Big Short. He was one of the lone money managers to predict that the economy and stock market were in for a free fall. His reputation for making prescient market calls was cemented when the stock market crashed in the Great Recession.
Burry has been warning that the U.S. is in for another economic plunge, which would reverberate to the job market. Sensing that the White House is not owning up to the severe nature of the dilemma, he accused President Joe Biden of moving the goalposts on the definition of a recession (two consecutive quarters of contraction). Burry pointed out that Americans are using their credit cards to cover the high living costs. The high-interest rates on the debt will cause further concerns for the consumers.
His views are echoed in a new Maru public opinion poll, which found 57% of Americans are anxious over inflation’s impact on their financial situation, and 14% are experiencing a sense of fear, as they feel their lifestyle will decline.
Nouriel Roubini, chief executive of Roubini Macro Associates and teacher at New York University’s Stern School of Business, said, “There are many reasons why we are going to have a severe recession and a severe debt and financial crisis.” Roubini, another expert who predicted the financial meltdown of 2008 and 2009, told Bloomberg, “The idea that this is going to be short and shallow is totally delusional. Today, we face supply shocks in a context of much higher debt levels, implying that we are heading for a combination of 1970s-style stagflation and 2008-style debt crises—that is, a stagflationary debt crisis.” He believes that U.S. stocks will most likely plunge lower and drop by 50%.
Walmart’s Warning
Walmart’s share price plummeted about 10% and its management cut its quarterly and full-year profit guidance. Walmart, the largest big-box retailer, is a bellwether for the economy. So it’s alarming that one of the most successful U.S. companies that cater to working Americans is experiencing challenges.
As inflation hits a 40-year high and prices are uncomfortably rising, families are cutting back on their purchases. While they are buying necessities, such as food (which have low-profit margins), families are skimping on electronics and other items that don’t need to be bought at this time. The problem for Walmart and other retailers is that the profits are more substantial with the big-ticket items.
There are also concerns in an array of other sectors. For example, Wall Street is seeing fewer M&A, IPOs and deal-making activities. In addition, real estate faces headwinds as cash-strapped families can’t afford the higher monthly mortgage payments and are walking away from purchasing homes. Similarly, renters are not able to afford the rent in major cities.
Here’s Some Positivity
Famed Wall Street analyst Ed Yardeni offered some comfort. In a Bloomberg interview, the longtime securities analyst said the worst has passed for this bear market. The Yardeni Research president contends that the S&P 500’s plummet last month to a 3,666.77 low was most likely the bottom of the 2022 stock market rout. In addition, he points to the recent corporate earnings mainly looking solid, as American consumers continue to spend and there is still a high employment rate.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
